Three Big Lies of Welfare Reform

“Universal Credit is very simple and will ensure that work always pays and is seen to pay.”
The Rt Hon Iain Duncan Smith MP, Secretary of State for Work and Pensions
Universal Credit: welfare that works, White Paper November 2010

The Truth – Universal Credit and the rest of the future system(s) is not very simple

Universal Credit, the new simple benefit, is clearly more difficult to understand than existing means-tested benefits (I speak as someone who has now given three rounds of training on this and seen the difficulties even experienced advice workers have with the new scheme, as well as having implemented the rules in our Future Benefits Model).

The ‘simplicity’ created by linking hugely different earnings disregards to housing costs, embedding a work capability assessment into an in-work benefit, a three-stage earnings assessment, mortgage interest support removal for workers, benefits-cap cliff-edge effects, bedroom limits, etc. etc. is a plain figment.

Add to that the new claims process – digital by default – with all the issues about access to the technology, capability to use and understand the system and readiness of the system. The process of setting up support for people who will have difficulties is only just starting.

Then there’s the fact that Universal Credit is going to be the first test of the Government’s Identity Assurance process where claimant will have to ‘assert their identity’ to one of a number of commercial organisations before they can make a claim and it becomes rather less simple again.

HMRC and employers will be a vital part of the information provision process for Universal Credit claimants in work. What happens if either of them does things late or wrongly? Or the new HMRC computer system has problems? Where do people go for help?

In short the benefits system in the medium term will be more complex and difficult to understand than the current system.

Indeed there will not be one current system in the future – or even two.

Because the changes to benefits are being introduced gradually, over several years, during the next few years, some people may, in similar circumstances,

Receive benefits under the current schemes or Universal Credit

Receive the new Pension Credit Plus (See ‘older people protected ‘below), with its changes to the current scheme, or the even newer Single-Tier pension linked Pension Credit (with savings credit transitionally in place partially for five years)

There will be mixed-age couples (those older people with younger partners) who may fall into either of the groups and most of the different schemes in the groups

Some people will be transitionally protected for a very long time under Universal Credit, particularly those with capital moving from tax credits

Those looking for help from Council Tax Support will face different rules for main schemes for working age and older people, different schemes locally in England and different schemes in Wales and Scotland

Disabled people will face very different support from DLA or PIP, with the different rules for receipt but also with different consequences, depending on which of them they get, into the benefits in the other multiple schemes

In addition these schemes may be affected by capping, occupation rules and other variations.

The confusion which will exist for a claimant who may have to understand which of eight competing schemes may apply to them clearly show how ‘simple’ this is

Lie Number 2 – You’re always better off in work

“UNIVERSAL CREDIT
It will be withdrawn at a constant rate, so that people know exactly how much better off they will be for every extra hour they work, to ensure that work always pays more than benefits…”
The Rt Hon Iain Duncan Smith MP, speech The Conservative Party Conference 2012

The Truth – You’re not

This is simple enough to demonstrate as a blatant untruth.

In Universal Credit, help with mortgage interest payments will not be given to anyone with any earnings. Even a penny a week will disqualify someone.

If you are not working at all then you can still get help with your mortgage interest, as you can in current benefits if you work less than 16 hours a week.

The maximum help that can be given under Universal Credit is the interest, at a standard 3.63%, on up to £200,000 of mortgage. That means the highest amount of help is £139.61 a week.

Someone getting that amount of help will be encouraged to take any work that they can find; indeed under the new sanctions and conditionality rules, they will lose all their benefits for increasing periods if they don’t take the work.

If they take a part time job paying £50 a week they will lose all their mortgage support immediately.

Result – they will be £89.61 a week worse off because they are working.

Remember what Mr. Iain Duncan Smith said; “Universal Credit is very simple and will ensure that work always pays and is seen to pay.”

Lie Number 3 – Older People are Protected

“.. if we look at the areas where savings were made .. virtually without exception, those changes apply wholly or predominantly to those of working age.
The benefits of those above pension age were protected, almost exclusively.. the political priorities of pensioners and older people more broadly—as we all know, they are the people who turn out and vote—are very much in the Government’s mind at all times.”
Steve Webb, Minister of State at the DWP

The Truth – Big changes and many losers

Older people are going to see a number of changes which may lead to them becoming substantially worse-off.

Pension Credit has to change because some of the benefits that older people can get at the moment are disappearing – Housing Benefit and Child Tax Credit in particular. Because of that they will see support for children being incorporated into Guarantee Pension Credit. There will also be a new Housing Credit which will provide support for those paying rent (and perhaps mortgage support will be moved into it as well). This is being called Pension Credit Plus

Those structural changes are inescapable, although the implementation could have been different.

What are not inescapable are the other changes which are being introduced to benefits for older people.

Capital Cut-Off

At the moment there is no capital cut-off for older people, recognising that they have been encouraged to save and that, for many, their savings are their only ‘safety-net’. Now it has been announced that there will be a cut-off in future, although the amount has not been set down and will be larger than the £16,000 cut-off in working-age benefits.

Mixed-Age Couples

Some of the larger notional losses for couples without children are in cases where one member is of working-age and one is currently eligible for Pension Credit. Under the reform they will be eligible for Universal Credit as opposed to Pension Credit
DWP Universal Credit Impact Assessment

At the moment Pension Credit for a couple can be claimed when the older partner reaches the qualifying age. In future it will be the younger partner’s age that counts. This means that couples will have to remain on working age benefits which have a much lower rate of benefit than Pension Credit. That’s over £5,000 a year less for couples. A single person on Pension Credit gets more than a couple on Universal Credit.

Existing Pension Credit claimants won’t be moved onto Universal Credit but those who are currently entitled will get Universal Credit if they don’t claim by a cut-off date, which is yet to be announced.

Mortgage Interest Recovery

The DWP have said that they intend to recover mortgage interest help given to older people when they die or sell their home; plus interest and an administration charge.

Another Pension Credit Scheme

When Single-tier pensions are introduced, in 2016 now, there will be a separate, new, Pension Credit scheme for those recipients. The ‘old’ (‘new’) Pension Credit Plus will continue for people getting the ‘old’ state pension but people getting the new one will see a different scheme. They will lose entitlement to Savings Pension Credit completely although there will be a transitional period of five years when they can continue to claim the Savings Pension Credit amount attributable to housing costs. (Remember this is the new simple benefits system).

Older people in work

At the moment older people in work can claim Working Tax Credit, if they meet the conditions, as well as Pension Credit. They will not be allowed to claim Universal Credit, the only in-work benefit, in future. At a time when people are increasingly driven to work longer and delay retirement, support is being taken away from them.

Overall there has been little attention paid to the changes for older people because the government has said that they are being protected. There are more changes than I can list here which will affect them severely. People are making decisions today which will have consequences in the future and which, if advice was available, they might not do.

Consequences for Advice

Last month the DWP published their document Universal Credit – Local Services Support Framework which proposes the way in which necessary support might be given to help people claim and manage Universal Credit.

Talking about what services might be provided it says, “It is anticipated that the demand for services will change; some will decline, (for example the extensive advisory service needed to serve the complicated network of existing benefits)”

Perhaps this is the biggest lie of all.

It is one that underlies the abolition of legal aid support for social welfare law which takes effect in April. It underlies much of the reduction in funding by local authorities for advice services.

If this is saying that there will be less need for benefits advice in the future then it is plainly wrong but my concern is that the repetition of this ‘simpler benefits – no advice needs’ mantra has been believed by those responsible for funding and ensuring advice needs are met. The lie that the future benefits system is simpler means that hard-pressed funders can cut budgets without guilt, the loss of advice will lead to fewer challenges and fewer challenges will demonstrate that the system is simpler.